Too many investors underrate UK shares. Some think they’re a little dull compared to those giant US tech mega-caps. Could that be their superpower?
Alexandra Jackson, director of equities at Rathbones Asset Management, says if you want to build serious wealth rather than chase market trends, the answer may be to buy boring UK shares, then stick with them for years. “Some of the UK’s most successful long-term investments don’t sell excitement, disruption or bold visions. They sell unavoidable, regulated, repetitive, or mundane things like fire detectors, sausages, cables or road safety barriers. But they do it exceptionally well.”
How can stocks this boring be so beautiful?
Jackson highlighted seven “boring” UK shares that would have made investors millionaires if they’d put £5,000 into each 20 years ago. Obviously, this is a self-selected list of winners. And there’s no guarantee they’ll keep delivering. Yet it’s a fascinating exercise, and right there is a stock I’ve wanted to own for years.
She said a £5,000 investment in FTSE 100-listed health and safety technology specialist Halma (LSE: HLMA) 20 years ago would now be worth £170,000, with dividends reinvested. Halma sells products designed to meet growing safety regulations, including smoke alarms, gas sensors, water testing equipment and medical diagnostics. “You only notice them when they fail, which is precisely why demand keeps coming back.”
I’m itching to add Halma to my Stocks and Shares ISA. It’s increased dividends for 45 years in a row, which suggests a brilliantly run company that rarely puts a foot wrong. So what’s stopped me? It’s just too expensive, with a price-to-earnings ratio of 49. One bad acquisition, weaker growth or broader stock market sell-off could hit the shares hard.
Personally, I wouldn’t buy Halma today. But I’ll be watching it like a hawk because if we get a wider stock market crash and that P/E falls back to earth, I’ll swoop.
The other six ‘boring’ shares show the power of long-term compounding. Diploma distributes seals, cables and technical components inside mission-critical supply chains. Jackson said its relentless cash generation has turned £5k into a stunning £371,000 in 20 years.
What makes these companies winners?
Cranswick makes pork, poultry and prepared foods. Its vertically integrated ‘farm-to-fork’ model and dependable demand have delivered years of strong returns. IT reseller Computacenter generates steady earnings growth and strong cash flows.
Hill & Smith supplies road safety barriers, utility poles and the like, with a focus on niche regulated markets and disciplined acquisitions. Compass Group serves meals in schools, hospitals, offices and sports venues around the world. And 4imprint sells promotional merchandise such as branded pens, water bottles and polo shirts, an unglamorous but rewarding marketing activity.
Over 20 years these stocks have turned £5,000 into…
- Halma – £170,000
- Diploma – £371,000
- Cranswick – £72,000
- Computacenter – £106,000
- Hill & Smith – £85,000
- Compass – £71,000
- 4imprint – £124,000
Every stock has risk so investors should do their own research. Britain’s own Magnificent Seven may lack star power. But they show how building wealth doesn’t always need exciting tech or speculative growth stories. Now that I’ve been alerted to their charms, I’ll do some research of my own. Then watch and wait for a buying opportunity.
